UPDATE 1-Venezuela launches WTO challenge to U.S. sanctions

GENEVA, Jan 8 (Reuters) - Venezuela has launched a complaint at the World Trade Organization to challenge U.S. sanctions, saying that a ban on travel by blacklisted individuals and trade restrictions break WTO rules, a WTO filing showed on Tuesday.

In its second-ever WTO complaint, filed on Dec. 28, Venezuela also cited U.S. rules on sales of gold and discriminatory treatment of Venezuela’s debt and transactions in digital currency as breaches of the international rules.

There was no immediate reaction from the United States, which has been tightening sanctions against the government of President Nicolas Maduro in recent months, targeting senior officials and Maduro’s wife and allies, as well as banning sales of Venezuelan gold.

On Tuesday it imposed sanctions on a Venezuelan currency exchange network that the U.S. Treasury said siphoned billions of dollars to corrupt government insiders.

Almost 2 million Venezuelans have fled since 2015, driven out by food and medicine shortages, hyperinflation, and violent crime. Thousands have made their way to south Florida.

Maduro, who denies limiting political freedoms, has said he is the victim of an “economic war” led by the United States.

The United States has 60 days to answer Venezuela’s WTO complaint, after which time Maduro’s government could ask the WTO to adjudicate.

But Washington is unlikely to fear any such legal escalation, partly because the WTO allows exceptions to its rules if there are “essential security interests”.

Citing national security at the WTO used to be unthinkable, but the taboo has been broken in disputes between Russia and Ukraine and between Qatar and several of its neighbours, and last year the United States also used national security to justify its steel and aluminium tariffs.

Even if Venezuela presses its case at the WTO, it is unclear if the WTO dispute settlement system will be able to help, because a U.S. block on new judicial appointments means the WTO system is set to be paralysed from December 2019, and disputes filed now are likely to end up in legal limbo.

If the paralysis takes hold, trade experts say disputes could end up being decided by diplomatic negotiation rather than by judges. (Reporting by Tom Miles Editing by Gareth Jones)